The Bank for International Settlements, also known as BIS, is launching a full-scale attack on bitcoin. If you don’t know what the BIS is, you can think of it as the central bank of central banks. In a recent report, the BIS laid out its vision for the future of the monetary system.
On May 9th, 2022, the stablecoin UST lost its peg to the dollar and collapsed. The Terra collapse wiped out over $40 billion worth of value in a single week. It sent shock waves throughout the cryptocurrency market. Terra is an algorithmic stablecoin that aims to maintain a peg to the US dollar.
A stablecoin is a cryptocurrency that is pegged to another currency, commodity or asset. The most widely used stablecoins are pegged to the US dollar. This means, one stablecoin should be worth $1. Stablecoins combine the digital and borderless nature of cryptocurrencies with the low volatility of traditional fiat currencies.
UST is an algorithmic stablecoin that is supposed to stay pegged to the US dollar at $1. This means, 1 UST should always be convertible into 1 USD. However, in recent days, the stablecoin broke its peg and plunged to $0.14, losing its parity and wiping out over 85% of its value.
Fiat currency is a form of government-issued money that isn’t backed by a commodity like silver or gold. Nation states adopted fiat currency as primary form of money after 1973.
Bitcoin is a cryptocurrency that a pseudonymous group or person called Satoshi Nakamoto invented in 2008. It is the oldest cryptocurrency and the largest by market capitalization. Bitcoin is different from government-issued fiat currency.
The blocksize war was a battle for control over Bitcoin’s protocol rules that took place between 2015-2017. The blocksize war consisted of two camps. The small blockers wanted to keep Bitcoin’s block size small. The large blockers, on the other hand, pushed for an increase in Bitcoin’s block size.
Cryptocurrency is a recent phenomenon that started around ten years ago. After Bitcoin was invented, several altcoins appeared on the scene including Namecoin and Litecoin. These altcoins promised improvements such as faster payments and scalability, and sometimes alternative use cases such as decentralizing existing internet services.
After Bitcoin was invented by Satoshi Nakamoto, many others decided to create their own variations of Bitcoin with minor or sometimes significant changes. Today, there are over 14,000 altcoins. This new market is often referred to as cryptocurrency market or simply crypto. There are different types of proponents in the industry.
Bitcoin is often called a hedge against inflation and compared to gold. Historically, gold has been inversely correlated with the stock market. Whenever stocks crash, investors pull out of the stock market and invest into gold. And when stocks are in a bull market, investors move money from gold into the stock market.